Escalating Trade War Raises Questions Over Canada’s F-35 Future

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With Canada and the United States now locked in a rapidly escalating trade war, questions are being asked about the effect this could have on Ottawa’s plans to buy the F-35 Joint Strike Fighter, as well as how the broader program could be impacted, bearing in mind the not inconsiderable involvement of Canadian industry.

Looking first at the background to the trade war, U.S. President Donald Trump announced last week a 25 percent levy on Canadian and Mexican imports to the United States (as well as an additional 10 percent on China). Almost all goods will be affected, with Trump citing his concerns about illegal immigration and drug trafficking as the basis for the move. At the same time, Trump has also lambasted trade imbalances and unfair trade practices as major drivers behind this policy.

WASHINGTON, DC - JANUARY 31: U.S. President Donald Trump signs Interior Secretary Doug Burghum's commission with Burgum and his wife Kathryn Burgum in the Oval Office on January 31, 2025 in Washington, DC. Trump spoke to reporters about tariffs against China, Canada and Mexico and how Burghum will coordinate with the Energy Department and the Environmental Protection Agency. (Photo by Chip Somodevilla/Getty Images)
U.S. President Donald Trump in the Oval Office on Jan. 31, 2025. On this occasion, Trump spoke to reporters about tariffs against China, Canada, and Mexico. Photo by Chip Somodevilla/Getty Images Chip Somodevilla

In response, Canada announced its own retaliatory tariffs against the United States, putting a 25 percent levy on a range of U.S. goods.

“We don’t want to be here, we didn’t ask for this,” Canadian Prime Minister Justin Trudeau said. He added that he would “not back down in standing up for Canadians,” while warning that the tariffs would impact people’s lives on both sides of the border. To give an idea of the deeply interconnected nature of the economies of the three North American countries, around $2 billion worth of manufactured goods are estimated to cross their borders each day.

Trump has said he’s willing to increase the duties further if the countries in question retaliate to his tariffs, as Canada has done.

What’s unclear at this point is whether the tariffs will affect the F-35 — as well as a raft of other military items that are sold between the United States and Canada. There have already been suggestions, however, that Canada might want to look elsewhere for its new fighters, in a snub to the United States. The future of Canada’s P-8 Poseidon maritime patrol aircraft procurement has also been questioned.

An artist’s concept of a P-8A Poseidon in Canadian colors. Boeing

In a comment provided to TWZ, Russell Goemaere, Public Affairs Officer at the F-35 Joint Program Office said: “At this time, we are assessing impacts of any tariffs and will work with the government and our industry partners on the way forward.”

When asked this weekend about the prospects of a rethink of the acquisitions of the F-35 and P-8, David Eby, the premier of British Columbia, said:

“The prime minister will speak for the national approach … For major defense expenditures, which I know is a priority for the Americans, for the president, he wants to see Canada putting additional money into defense, well, we are all happy to do that work together, but these tariffs will force Canada into procuring from other countries.”

But an exit route from the F-35 program will be far easier said than done for Canada.

Canada finalized a deal with the U.S. government and Lockheed Martin for the procurement of 88 F-35As in January 2023, with the expectation that these would start to be delivered in 2026. You can read our report from March 2022 on Canada’s original selection of the F-35 to replace its fleet of aging CF-18 Hornets, as part of the Future Fighter Capability Project, here.

Infographic outlining the key features of Canada’s future F-35As. RCAF

The finalization of the deal appeared to bring to an end a long and fraught procurement process.

Back in 2010, Canada’s Conservative government announced plans to buy 65 F-35As. Then, once Trudeau’s Liberal Party took power in 2015, an F-35 buy looked to have been ruled out. Amid very public criticism of the choice of the Joint Strike Fighter, Trudeau also made a pre-election promise that he would not purchase the F-35 if he was elected.

For a while, it seemed that the F-35 was excluded from the Future Fighter Capability Project and plans were drawn up to buy a smaller number of F/A-18E/F Super Hornets as “interim” fighter jets instead. At that point, an earlier trade dispute between the Canadian government and Boeing led to the F/A-18E/F being kicked out of the competition in December 2021.

By this stage, the only other contender in the competition was Saab’s Gripen E, which the Swedish company had offered to build in Canada, in an effort to secure support for its bid.

Saab Gripen E. Saab

Two other European candidates, the Eurofighter Typhoon and the Dassault Rafale, both left the competition before it had begun, complaining that the process unfairly favored U.S. companies.

Finally, in March 2022, the F-35 was announced as Ottawa’s preferred selection.

The Canadian government has said it expects to invest $19 billion in the F-35 project, a figure that has steadily climbed (in March 2022 the estimate was put at between $12 billion and $15 billion).

Canada has been a part of @thef35 program from the very beginning.

Today, we're honoured to share the official selection of the #F35 and mark a new era of partnership and prosperity with Canadians as the program strengthens opportunities for continued economic growth.

— Lockheed Martin Canada (@LMCanadaNews) January 9, 2023

While the first F-35 for Canada is not scheduled to be handed over until next year, Ottawa has already invested heavily in the program. At the time that the Future Fighter Capability Project was launched in 2017, Canada had long been paying into the F-35 program as an industrial partner. Canada has been a member of the F-35 program from the very start, initially as a Level 3 industrial partner, without a firm commitment to buy any actual aircraft.

Indeed, between 1997 and 2021, Canadian investment in the Joint Strike Fighter amounted to $613 million. All this helped Canadian firms secure dozens of contracts related to the F-35’s development and production. By 2019, these contracts had already brought a combined total of more than $1.3 billion into the Canadian economy. Furthermore, Canadian companies are eligible to bid on F-35-related contracts throughout the service life of the aircraft.

Lockheed Martin

Ultimately, it was this major industrial stake in the F-35 that meant the stealth fighter was also expected to be the front-runner in any formal competition in Canada. It’s a dynamic, which, in turn, makes it singularly difficult for Canada to extract itself from the F-35 program. However, there is a precedent. Turkey, which also had a significant industrial stake in the Joint Strike Fighter, found itself removed from the program over its refusal to give up a planned purchase of Russian-made S-400 air defense systems.

Canada has already made significant investments in new infrastructure to accommodate the F-35, including the construction of fighter squadron facilities at 3 Wing in Bagotville, Quebec, and 4 Wing in Cold Lake, Alberta. This, taken together with industrial aspects, as well as a major need for the aircraft makes it seem unlikely that Ottawa will scrap its plans to buy F-35s, despite previous flip-flopping on the issue. No other aircraft available today offers the same package of capabilities as the F-35, either.

Last week, in a post on LinkedIn, the Canadian Association of Defense and Security Industries (CADSI) warned that “any U.S. tariffs applied to Canadian defense exports would have a significant negative impact on our members, and on the highly integrated Canada-U.S. defense industrial base.”

A U.S. Air Force F-35 Lightning II makes an aerial demonstration during the 2023 Abbotsford International Airshow in Abbotsford, British Columbia, Canada, on Aug. 12, 2023. As one of the biggest airshows in Canada, the 2023 Abbotsford International Airshow takes place here from Aug. 11 to Aug. 13. (Photo by Liang Sen/Xinhua via Getty Images)
A U.S. Air Force F-35A performs during the 2023 Abbotsford International Airshow in British Columbia, Canada, on Aug. 12, 2023. Photo by Liang Sen/Xinhua via Getty Images Xinhua News Agency

More than a hundred Canadian companies provide components for the F-35, with one of them — the Ottawa-based Gastops — being a sole-source supplier, responsible for Oil Debris Monitor (ODM) engine sensors. This means that Gastops products are found in every single F-35 that is built.

Other Canadian manufacturers supply F-35 components, on a non-sole-source basis that include wing bulkheads, keel beams, horizontal tails, landing gear, circuit cards, electro-hydraulic actuation systems, weapons bay door inserts, power and thermal management system controllers, and more.

Ultimately, the F-35 is just one example of a U.S. defense program that Canada benefits from in terms of defense exports, which will not be hit by the new tariffs. There are many more such programs. Canada does not provide metrics for military exports to the U.S. annually, but estimates put it well over $1B a year. The potential removal of F-35-related revenues from this total would be a significant blow, but the loss of Canada’s fighter business to the U.S., as well as disruptions in its supply chain that could also occur, would be of a higher monetary value.

On the other hand, Trudeau’s tariffs launched in response to those from the United States will not immediately impact defense industries. The first raft of Canadian tariffs apply to U.S.-made consumer products like liquor, vegetables, clothing, household appliances, furniture, and sports equipment.

Prime Minister of Canada Justin Trudeau during the final day of the NATO Summit in Washington DC, United States on July 11, 2024. (Photo by Jakub Porzycki/NurPhoto via Getty Images)
Prime Minister of Canada Justin Trudeau during the final day of the NATO Summit in Washington DC, on July 11, 2024. Photo by Jakub Porzycki/NurPhoto Jakub Porzycki

However, if the trade war continues, Canada has threatened to expand its actions, which may then include restrictions on the export of critical minerals and energy products to the United States, which would have an impact on the U.S. defense ecosystem. Consideration has also been given to legislation that would prevent U.S. companies from bidding on government contracts, which could effectively shut off the Canadian market to U.S. defense contractors.

Overall, it remains unclear exactly how the F-35 program let alone the wider defense-industrial relationship between Canada and the United States will be affected by the current trade war. What’s clear is that the CF-18 badly needs replacement and any further holdup in the Future Fighter Capability Project would be very unwelcome news for the Canadian military. Were Canada to abandon its plans to buy the F-35, it would derail its fighter replacement timeline and a new effort would need to be restarted yet again.

There is also a significant symbolic value for Canada, which is spending billions on a stealth fighter from a country that is actively fighting a trade war with it and which has the potential to crash its economy. There is also the issue of the supportability of the F-35. Canada is investing hugely in a strategic resource that needs constant support from its U.S. supplier, and this could be disrupted suddenly at the whim of the U.S. government, should it so wish. All these actions are also being watched closely by other U.S. arms customers overseas. Trump is threatening to enact the same tariffs on at least some of its European allies, as well.

So, as it sits now, like many other aspects of the current economic tensions between the U.S. and Canada, it is a wait and see situation. But the longer the tariffs remain in place, the stronger the responses will be as political pressures mount.

Contact the author: thomas@thewarzone.com